More bad news for Tesla shareholders – where to now?
TSLA shares have plunged in after hours trading after the latest revenue numbers showed its biggest decline on record.
Tesla shareholders hoping for a reprieve might be in for a longer wait than a Cybertruck delivery.
The EV giant’s latest earnings report missed the mark, with falling revenue, shrinking profits and a massive drop in free cash flow.
While Tesla is still promising big things, like robotaxis, a cheaper model and humanoid robots, the current numbers suggest the road ahead could be bumpier than some investors expected.
Tesla reported US$22.5 billion in revenue for the quarter, a 12% drop compared to this time last year. Profits also took a hit, down 16%, and free cash flow (the cash left over after Tesla pays the bills), plunged by a whopping 89%.
Following the news, the Tesla share price had fallen as much as 6% in after hours trading.
So, what’s going on?
The why behind Tesla's falling sales is old news.
The EV maker has been plagued by growing competition (especially cheaper vehicles from China) and public upset over Elon Musk's dabbling in US and global political affairs.
Musk’s recent attempts to distance himself from Donald Trump don’t seem to be winning over consumers.
Stake's market analyst Samy Sriram concedes the report will disappoint fans.
“The raw numbers don’t make for pretty reading. Earnings per share and revenue both declining, along with a drop in net income, operating margin..."
One of the biggest revenue blows came from a 51% drop in regulatory credits, the cash Tesla makes from selling carbon credits to carmakers who can’t meet emissions targets.
"Analysts flagged beforehand this could be a sore spot for Tesla, but it’s still a pain point on the balance sheet," said Sriram.
Despite all that, there are a few positive points. Tesla’s pushing forward with a cheaper model expected later this year, expanding its robotaxi program in Austin, and ramping up its energy storage game. Tesla made a record US$846 million gross profit from energy storage this quarter.
What should investors do?
So, if you own Tesla shares or are thinking about buying in, what does this mean?
It really depends on your view of the company. As Samy Sriram puts it:
“If you buy into Elon Musk’s promises, you’ll probably still buy into Tesla. If you don’t, you won’t.”
In other words, the stock’s future still hinges on bold promises: cheaper EVs, driverless robotaxis, humanoid robots, battery breakthroughs. But right now, the financials are going in the wrong direction.
Stake data shows retail investors are cautious after the earnings call, with over 56% of post-market trades "sell" orders.
That doesn’t mean it’s all over for Tesla. But if the next couple of quarters look like this one, it could cause more investors to rethink.
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